Allowed

Sri.M. Rajesh v. M/S Metro Cash and Carry

Karnataka HC14 Jul 2021MFA/7207/2017

Case brief

AI extract

What is this about?

The High Court of Karnataka allowed an appeal against an order granting an interim injunction under Section 9 of the Arbitration and Conciliation Act. The Court held that since arbitral proceedings were not commenced within the ninety-day limit mandated by Section 9[2], the interim order was unsustainable and the appeal was allowed.

What did the court decide?

Impugned judgment and order dated 04.08.2017 allowing the petition under Section 9 is set aside.

Sri.M. Rajesh Vs M/S Metro Cash and Carry — Arbitration | Karnataka HC (2021)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 14^TH DAY OF JULY 2021

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PRESENT

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THE HON’BLE MRS.JUSTICE S.SUJATHA

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AND

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THE HON’BLE MR. JUSTICE E.S.INDIRESH

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M.F.A.No.7207/2017 (AA)

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BETWEEN :

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SRI M.RAJESH S/O MR.MANICKAM AGED ABOUT 40 YEARS R/AT No.503, 7^TH CROSS MAHALAKSHMI LAYOUT BENGALURU-560086. ...APPELLANT

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(BY SMT.REVATHY ADINATH NARDE, ADV.)

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AND :

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M/S. METRO CASH & CARRY INDIA PRIVATE LIMITED REG. OFF AT: Sy.No.26/3, WARD No.9 ‘A’ BLOCK, INDUSTRIAL SUBURBS SUBRAMANYANAGAR BENGALURU-560055 REPRESENTED BY Mr.JAYADEEP BALAKRISHNAN. …RESPONDENT

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(BY SMT.PRIYA D. KALE, ADV.)

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THIS M.F.A. IS FILED UNDER SECTION 37(1)[b] OF THE ARBITRATION AND CONCILIATION ACT, READ WITH SECTION 151 OF CPC, AGAINST THE ORDER DATED 04.08.2017 PASSED IN A.A.No.15003/2015, ON THE FILE OF THE VTH ADDITIONAL DISTRICT AND SESSIONS JUDGE, DEVANAHALLI, BENGALURU RURAL DISTRICT, ALLOWING THE PETITION FILED UNDER SECTION 9 OF THE ARBITRATION AND CONCILIATION ACT.

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THIS APPEAL COMING ON FOR ADMISSION, THIS DAY, S. SUJATHA, J ., DELIVERED THE FOLLOWING:

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J U D G M E N T

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This appeal is filed under Section 37[1][b] of the Arbitration and Conciliation Act, 1996 [‘Act’ for short] challenging the judgment and order dated 04.08.2017 passed in A.A.no.15003/2015 on the file of the V Additional District and Sessions Judge, Devanahalli [‘Trial Court’ for short] whereby the petition filed under Section 9 of the Act by the respondent herein has been allowed restraining the appellant herein from alienating the suit property till conclusion of arbitral proceedings.

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Succinctly stated the facts are that the

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appellant is claiming to be the absolute owner of the suit schedule property measuring 3.5 acres in Sy.No.153/2 situated at Katigenahalli, Jala Hobli, Bengaluru North Taluk. The respondent herein is a company carrying on business of selling different types of products to its business customers. In order to set up an additional

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wholesale distribution centers in Bengaluru, it appears the respondent contacted the appellant and entered into a memorandum of understanding dated 12.02.2015. Though an area of 01.20 acres carved out of the schedule property was leased out to M/s. RCC Mix till 30.04.2021 by a lease deed dated 05.02.2011, it was agreed between the parties herein that they would execute a memorandum of understanding, recording their intentions in writing and the deal would be concluded by executing a lease deed after evicting the tenant from the schedule property. In furtherance of memorandum of understanding, an earnest money of Rs.5,00,000/- was paid by the respondent through cheque bearing No.084724 dated 18.02.2015 drawn on Royal bank of Scotland, Residency Road Branch, Bengaluru in favour of the appellant but the same has not been encashed and the cheque was returned on the same day as contended by the appellant. It transpires that the respondent has approached the Trial Court

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under Section 9 of the Act and an exparte temporary injunction order was passed on 05.12.2015 and the impugned order has been passed on 04.08.2017 allowing the petition filed under Section 9 of the Act.

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Being aggrieved by the same, appellant is before this Court.

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Learned counsel for the appellant would submit that as per the terms and conditions stipulated in the memorandum of understanding, though no lease agreement was entered into between the parties, invoking sub-clause [b] of 9 of the memorandum of understanding, the respondent herein approached the Trial Court seeking for an interim measure. The Trial Court after having passed an exparte order on 05.12.2015 restraining the appellant herein from alienating or transferring right and title of the suit property, proceeded to pass the impugned order on 04.08.2017, which is nothing but a palpable error committed by the Trial Court.

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Inviting the attention of the Court to Section 9[2] of the Act and Rules9[4] of the High Court of Karnataka Arbitration [proceedings before the Courts] Rules, 2001 [‘Rules’ for short] submitted that as per Section 9[2] of the Act, where before the commencement of the arbitral proceedings, a Court passes an order for any interim measure of protection under sub-section [1], it is mandatory that the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such further time as the Court may determine. But, no attempt has been made by the respondent to seek for appointment of arbitral Tribunal. In view of Rule 9[4] of the Rules, the exparte injunction order passed on 05.12.2015 stands vacated albeit no specific order being passed by the Court to that effect. Hence, the impugned order is unjustifiable and deserves to be set aside.

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Learned counsel for the respondent made

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an endeavor to justify the impugned judgment

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and order submitting that notice for appointment of the arbitral Tribunal was issued on 01.03.2016 by the respondent. However, the appellant has not co-operated for the appointment of arbitral Tribunal. Placing reliance on Section 21 of the Act, submitted that issuance of the notice is the commencement of the arbitral proceedings and as such the arbitral Tribunal though not yet been appointed, it would not disentitle the respondent in seeking the interim protection under Section 9 of the Act and the same has been considered by the Trial Court in allowing the petition with the condition that the appellant herein is restrained from alienating the suit property till conclusion of the arbitral proceedings.

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We are not inclined to accede to the arguments advanced by the learned counsel appearing for the respondent herein for the following reasons:

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Firstly, the order under Section 9[2][1] of the Act is an order passed as an interim protection measure and it

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is mandatory that the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such further time as the Court may determine.

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Further, as per Rule 9[4] of the Rules, in case of an application for interim measure made before initiating arbitral proceedings, if the arbitral proceedings are not initiated within three months from the date of the presentation of the application under Section 9, any interim order granted shall stand vacated without any specific order being passed by the Court to that effect.

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In view of the aforesaid provisions, we are of the considered view that there is considerable force in the arguments advanced by the learned counsel appearing for the appellant. The order impugned passed on 04.08.2017 allowing the petition filed under Section 9 of the Act is wholly unjustifiable and cannot be

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approved. This view is fortified by the Co-ordinate Bench decision of this Court in M/s Paton Constructions Private Ltd., vs. M/s. Lorven Projects Ltd., and another reported in ILR 2017 KAR 3016 . The order passed as an interim measure having been terminated automatically in terms of Rule 9[4] of the Rules, further allowing the petition is untenable and deserves to be set aside.

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For the reasons aforesaid, appeal stands allowed. The impugned judgment and order dated 04.08.2017 passed in A.A.No.15003/2015 is set aside.

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In view of the disposal of the main matter, I.A.No.1/2017 stands disposed of.

Sd/-

JUDGE

Sd/JUDGE

NC.

Sri.M. Rajesh v. M/S Metro Cash and Carry

Case brief

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Sri.M. Rajesh v. M/S Metro Cash and Carry

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